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ANALYSTS VIEW 4-Markets fret over swine flu outbreak
27 Apr 2009 03:24:50 GMT
 Source: Reuters
TOKYO, April 27 (Reuters) - Worries about a global flu pandemic are unnerving financial markets after an outbreak in Mexico. For full coverage of the flu outbreak, click on [nFLU]

Asia stocks retreated and the dollar hit a one-month low against the yen <JPY=> as concerns about the spread of the flu from Mexico prompted investors to trim riskier assets. The Mexican peso <MXN=> and commodities also fell.

U.S. stocks were poised to fall when trade kicks off later in the day. S&P futures were down about 2 percent <SPc1> in Asia, and safe-haven U.S. Treasuries gained. ------------------------------------------------------------

KEY POINTS:

-- Mexico said the new flu virus has probably killed 103 people in that country. Twenty cases are confirmed in the United States where the number of suspected cases has been growing.

- Millions of Mexicans were staying indoors to avoid the virus, and cases were reported in the United States and Canada.

-- The swine flu outbreak has the potential to cause a worldwide pandemic, but it is too early to say, the World Health Organization said.

COMMENTARY:

DANIEL CHAN, SENIOR INVESTMENT STRATEGIST, DBS BANK, HONG KONG

"This will deepen the global recession and will probably have a contagion effect on export-led economies in Asia such as South Korea, Thailand, Indonesia, Malaysia, China. All of them depend on the U.S. economy to recover. The stock market will suffer, but the bond market will not be affected that much. All sectors in the stock market maybe affected except for health and drugs industries. The airline industry might be affected badly.

"In Hong Kong, based on the SARS experience, at that moment, domestic consumption particularly retail sales have been affected because people stayed at home. Tourism was down. But external trade did not suffer much because customers from other countries were still able to send orders to China and Hong Kong."

NAGAYUKI YAMAGISHI, STRATEGIST, MITSUBISHI UFJ SECURITIES, TOKYO

"There's a bit of an impact in that the dollar is a little weaker and U.S. stock futures were down, but it's hard to say much without knowing more about the severity of the illness and what could happen. If the WHO were to declare a pandemic, transport stocks -- anything connected with movements of people -- would probably take a hit.

"At this point, though, the impact is likely to be limited until we know a bit more."

TAKAFUMI YAMAWAKI, INTEREST RATE STRATEGIST, BNP PARIBAS SECURITIES, TOKYO

"I don't think there will be too much impact (on Japanese government bonds). But airplane travel fell over SARS, so there might be some people who worry that it could hurt the economy. It all depends on how equities fare.

"If you ask whether it is positive or negative for JGBs it is positive."

TAKAHIDE NAGASAKI, CHIEF FX STRATEGIST, DAIWA SECURITIES SMBC, TOKYO

"The most visible impact on the forex market so far is that the Mexican peso is being sold. The extent of the outbreak and its overall impact will have to be seen first before we can make any judgments of its effect on the broader market, such as what this means for the dollar. What needs to be watched going forward is the kind of impact the outbreak will have on North American trade and the movement of people."

SUE TRINH, SENIOR CURRENCY STRATEGIST, RBC CAPITAL MARKETS, SYDNEY

"The G7 was a non-event for markets. The market focus this morning is completely on swine flu ... it's been risk aversion play with cross/yen and cross/Swiss falling and that's consistent with equity futures opening sharply lower.

"It's not been received too well and there are fears that ultimately it could lead to reduced travel and tourism, reduced stays in hotels, adding to the slowdown globally and specifically for the particular countries involved."

MARKETS:

-- The MSCI Asia-Pacific ex-Japan <.MIAPJ0000PUS> was down 1.6 percent, with losses led by financial and consumer discretionary shares.

-- The Australian dollar was the hardest hit as commodities also slid, losing 1.4 percent to $0.7120 <AUD=D3>. The dollar dipped to 96.62 yen <JPY=>, its lowest in a month, before ticking back up to 96.74 yen -- down 0.4 percent from late Friday trade.

-- S&P futures <SPc1> were down 2 percent, while U.S. Treasuries <RTRTSY1> posted solid gains.

(Reporting by Asia bureaux; editing by Eric Burroughs)


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